Blue Plate's owners, David Burley and Stephanie Shimp, also announced they will be offering an additional wage hike of their own to their non-tipped employees.

"We have always listened to our guests and our community," Burley said in a statement. "We've reflected and decided to try a different approach that will give our communities a clear indicator of who we are as a business."

Minnesota's minimum wage -- which had been one of the lowest in the nation -- increased by 75 cents an hour on Aug. 1. In response, the Blue Restaurant Company sent a memo to its employees alerting them that the new wage hike, coupled with rising health insurance costs, would cost the company $1.25 million. Therefore, the 2 percent credit card fee on tips that the restaurant used to pay would now be coming out of servers' tips.

"I think Blue Plate made a business decision that backfired on them: 'Enjoy your increase in the minimum wage increase but we're going to nick you on the back end,'" said Wade Luneburg, political director of UNITE HERE Minnesota, a union representing restaurant and hospitality industry workers. "It was a tacky policy. It is legal, but that probably doesn't make it right."

The company also announced that beginning Sept. 1, it will offer its non-tipped employees a new, higher minimum wage of $9.69 per hour. Minnesota's current minimum wage is now $8 an hour and will increase to $9.50 by 2016.

Burley also said the restaurant chain would begin holding monthly meetings with employees to "share ideas and innovations."